diff --git a/Engine/source/core/stream/bitStream.cpp b/Engine/source/core/stream/bitStream.cpp
index 1a5ab3202..704da2b11 100644
--- a/Engine/source/core/stream/bitStream.cpp
+++ b/Engine/source/core/stream/bitStream.cpp
@@ -488,24 +488,51 @@ void BitStream::readAffineTransform(MatrixF* matrix)
 
 void BitStream::writeQuat( const QuatF& quat, U32 bitCount )
 {
-   writeSignedFloat( quat.x, bitCount );
-   writeSignedFloat( quat.y, bitCount );
-   writeSignedFloat( quat.z, bitCount );
-   writeFlag( quat.w < 0.0f );
+   F32 quatVals[4] = { quat.x, quat.y, quat.z, quat.w };
+   bool flipQuat = (quatVals[0] < 0);
+   F32 maxVal = mFabs(quatVals[0]);
+   S32 idxMax = 0;
+
+   for (S32 i = 1; i < 4; ++i)
+   {
+      if (mFabs(quatVals[i]) > maxVal)
+      {
+         idxMax = i;
+         maxVal = mFabs(quatVals[i]);
+         flipQuat = (quatVals[i] < 0);
+      }
+   }
+   writeInt(idxMax, 2);
+
+   for (S32 i = 0; i < 4; ++i)
+   {
+      if (i == idxMax)
+         continue;
+      F32 curValue = (flipQuat ? -quatVals[i] : quatVals[i]) * (F32) M_SQRT2;
+      writeSignedFloat( curValue, bitCount );
+   }
 }
 
 void BitStream::readQuat( QuatF *outQuat, U32 bitCount )
 {
-   outQuat->x = readSignedFloat( bitCount );
-   outQuat->y = readSignedFloat( bitCount );
-   outQuat->z = readSignedFloat( bitCount );
+   F32 quatVals[4];
+   F32 sum = 0.0f;
 
-   outQuat->w = mSqrt( 1.0 - getMin(   mSquared( outQuat->x ) + 
-                                       mSquared( outQuat->y ) + 
-                                       mSquared( outQuat->z ),
-                                       1.0f ) );
-   if ( readFlag() )
-      outQuat->w = -outQuat->w;
+   S32 idxMax = readInt( 2 );
+   for (S32 i = 0; i < 4; ++i)
+   {
+      if (i == idxMax)
+         continue;
+      quatVals[i] = readSignedFloat( bitCount ) * M_SQRTHALF_F;
+      sum += quatVals[i] * quatVals[i];
+   }
+
+   if (sum > 1.0f)
+      quatVals[idxMax] = 1.0f;
+   else
+      quatVals[idxMax] = mSqrt(1.0f - sum);
+
+   outQuat->set(quatVals[0], quatVals[1], quatVals[2], quatVals[3]);
 }
 
 void BitStream::writeBits( const BitVector &bitvec )
diff --git a/Engine/source/core/stream/bitStream.h b/Engine/source/core/stream/bitStream.h
index b0bb2f22a..bd81f3b1b 100644
--- a/Engine/source/core/stream/bitStream.h
+++ b/Engine/source/core/stream/bitStream.h
@@ -207,18 +207,18 @@ public:
    void readAffineTransform(MatrixF*);
 
    /// Writes a quaternion in a lossy compressed format that
-   /// is ( bitCount * 3 ) + 1 bits in size.
+   /// is ( bitCount * 3 ) + 2 bits in size.
    ///
    /// @param quat The normalized quaternion to write.
-   /// @param bitCount The the storage space for the xyz component of
+   /// @param bitCount The the storage space for the packed components of
    ///                 the quaternion.
    ///
    void writeQuat( const QuatF& quat, U32 bitCount = 9 );
 
    /// Reads a quaternion written with writeQuat.
    ///
-   /// @param quat The normalized quaternion to write.
-   /// @param bitCount The the storage space for the xyz component of
+   /// @param quat The quaternion that was read.
+   /// @param bitCount The the storage space for the packed components of
    ///                 the quaternion.  Must match the bitCount at write.
    /// @see writeQuat
    ///